Question
A-The discount or premium will be fully amortized at maturity, the carrying value of the bonds will be equal to bonds market value. True False
A-The discount or premium will be fully amortized at maturity, the carrying value of the bonds will be equal to bonds market value.
True
False
B- Amortizing a bond discount:
a. | Decreases the market value of the Bonds Payable. | |
b. | Reduces the bond discount to zero over the bond life. | |
c. | Decreases cash flows from the bond. | |
d. | Increases the market value of the Bonds Payable. |
C- If the market rate of bonds is higher than the contract rate, the bonds sell at price higher than par value.
True
False
D-A 10-year bond issue with a $100,000 par value, 8% annual contract rate, with interest payable semiannually means that the issuer must repay $100,000 at the end of 10 years and make 20 semiannual interest payments of $4,000 each.
True
False
E- A company issued 10-year, 8% bonds with a par value of $400,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. The company received $413,896 in cash proceeds. Which of the following statements is true?
a. | The company must pay $400,000 at maturity plus 20 interest payments of $16,000 each. | |
b. | The company must pay $400,000 at maturity and no interest payments. | |
c. | The company must pay $413,896 at maturity plus 20 interest payments of $16,000 each. | |
d. | The company must pay $400,000 at maturity plus 20 interest payments of $15,000 each. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started